Every Bubble Bursts


Paper money (“fiat money”) endorsed by John Law. Photograph is in the public domain.

I grew up in south Mississippi as a twelve-year student of the Ocean Springs School District. I’m grateful for the excellent education given to me there. As early as third grade I was required to study a foreign language (I chose Spanish); at some point I was also introduced to the formal study of Mississippi history, which fascinated me. There I learned one of my earliest lessons in economics–in addition to those being taught to me at home by my father who was a banker. I remember to this day the lessons learned in history class while studying an event known as “the Mississippi Bubble.”

With the arrival in “Biloxey” (now spelled “Biloxi“) of the explorer Pierre LeMoyne d’Iberville in 1699, the French laid claim to a massive amount of land in what would one day be called the United States of America. It stretched from Louisiana to Newfoundland and included territory on both sides of the Mississippi River. You don’t need much creativity to imagine the financial steam that this discovery brought to France. Powerful people with connections to the French monarchy were quick to line up for a piece of the economic pie. You see, some things in history are fairly constant. One of those constants is the sycophancy of influential people who make a better-than-average living from their relations with powerful people in government.

It’s an incredible tale that includes many of the same elements being debated today: fiat paper money, greed, monopolies, Keynesian economics, powerful government, and little benefit to most citizens. If you want to read all the interesting details for yourself (and I certainly recommend that you do so), read the 2012 article by Forbes economist Jesse Colombo, located HERE.

To keep the story to essentials, let me give you a quick review. It seems that a powerful Frenchman of the early 18th century was in dire need of cash. To remedy the situation he turned to a Scottish financier then visiting France, a man named John Law, who introduced the French to a new concept. Rather than trading with precious metals like gold and silver, he suggested to them that a bank should be established by royal decree and that this bank should issue money made of paper. The paper, of course, was of no value except for the promise it carried to its bearer. We now know such money by the name of “fiat” currency, from the Latin word fiat, meaning “let it be done” (the “it” in this case is the assignment of monetary value to something that has no such value except by way of promise and expectation).

A tremendous rush of money began as people sought to capitalize on land in the New World. Law became amazingly wealthy, in cash and in power. He had the power to mint coinage and collect taxes. He had the trust of some of Europe’s most powerful people. He purchased an ailing institution known as the Mississippi Company, gave it a new name and sold shares that expanded in price at an unsustainable rate. The French crown pumped money into his scheme and so many people profited that the French term millionnaire came into vogue.

Eventually, cooler minds began to wonder about the wisdom of investments that skyrocket at such impressive levels while fueled by government-approved fiat money. Confidence faded. Investors demanded gold rather than paper and the entire scheme began to collapse. Company shares were drastically reduced and the millions earned became millions lost. The so-called “bubble” (Colombo says it’s better described as a series of “failed monetary policies“) was a product of excessive monetary growth. In other words, there was an explosion of money but not necessarily of value. In the end, the value of the money declined and inflation set it.

I’ll leave it to my dear readers to discover parallels to today’s world. In the last few months there has been an increase of voices reminding us that all bubbles eventually burst. And economic bubbles always rise higher and faster when inflated with easy government money. Time will tell.


The New Symbol for America’s Economic Decline

It really is the “silly season” of politics, friends, and now Barack Obama and his Democrat supporters are trying to save Big Bird.  Or to put it more correctly, they’re trying to use Big Bird to save the Obama campaign.  At the presidential debate on Wednesday evening, Mitt Romney actually threatened to make PBS pay for itself.

At PBS, the chicken coup where the big yellow fowl hangs out, they weren’t pleased.  The CEO immediately went on the defensive.  I’m not sure exactly what sex Big Bird is, but clearly for the CEO this bird is laying eggs made of gold.  She receives well over $600,000 per year as salary.  Now I’m stunned.

Speaking directly to the debate moderator, Jim Lehrer (an employee of PBS), Romney said, “I’m sorry, Jim. I’m going to stop the subsidy to PBS. I’m going to stop other things. I like PBS. I love Big Bird. I actually like you, too. But I’m not going to—I’m not going to keep on spending money on things to borrow money from China to pay for it.”

Why is it so egregious to suggest that PBS fund itself like all other television networks?  According to New York Times columnnist Charles Blow, it’s because Mitt Romney hates poor people.  Addressing Romney for his remark, Blow asks, “do you know anything about looking out for the less fortunate … or  do you think they’re all grouches scrounging around in trash cans?”  Mr. Blow really is blowing something our way.  It seems to be political smoke.  It can be used to provide cover for President Obama.

Over at PBS, Paula Kerger (the well-paid CEO) said it’s “stunning” that Romney would single out PBS in his remarks.  Her comment, and those of others who find Romney’s “attack” to be appalling are being covered widely in the press.  There’s talk of a million-muppet march and a revolt by moms everywhere who don’t have time to entertain their kids.  There’s even a photograph making the rounds in which the poor bird is standing in line with 1930s-era unemployed waiting for a handout.

For just a moment, America, can we put our feelings aside and use our brains?  Isn’t there more to making funding decisions than just the fact that some things make us feel warm and fuzzy inside?  I adore Big Bird, too.  I adore all the Muppets.  I think children should have the help they need to grow and develop solid skills for success.  How could I not?  I’m an educator!

It is not my intention to challenge the usefulness of educational programming.  What I do challenge–in the most energetic of ways–is the assumption that children won’t get those skills unless the federal government pays for their dissemination on PBS.  Quite literally, there are many sources for gaining knowledge and skills.  Those sources include twelve years or more of free schooling and thousands of free libraries all over the nation.  And let’s not forget that in 1990 the US Congress enacted the Children’s Television Act (CTA), mandating every TV broadcast station in the country to provide three hours of educational programming per week.  In addition, that programming must have a minimal amount of advertising and must be aired during particular times of day when children are watching.

How many education channels do we need before someone realizes that government funds aren’t necessary for people to learn?  We have the History Channel, History Channel 2, Discovery, National Geographic, Science Channel, Disney Channel, Animal Planet, Food Network, Biography, the Military Channel and more.  We even have music channels aimed at teaching and entertaining children such as Kidz Only and Toddler Tunes.  These channels are 100% educational all the time.  As Rasmussen pointed out earlier this year, 63% of the nation’s poor homes have cable television, meaning that a wide array of these educational resources is available to most of the poor.

Should PBS be saved?  Sure, that sounds fine.  But let PBS find its funding the same way that every other broadcast network finds their funding:  by advertising.  No more “games.”  Public broadcast stations actually already have advertising, but it comes across as plugs for their donors and the foundations that support its programming.  If you look closely at those foundations, they most often have policies and directives that lean left.  There’s nothing wrong with that at all.  But don’t shovel a load in my direction while trying to sell me the idea that there is no bias at PBS.

And let’s also not suppose that the well-paid CEO at PBS is acting from motives of benevolence or altruism.  She receives a large salary and she would like to keep receiving it, preferably at taxpayer expense.  I can’t really blame her for wanting to be paid well.  Don’t we all want that?  The difference is that most of us aren’t expecting our neighbors to come up with our salary by way of force through taxation.

To my mind, the argument that PBS must be publicly funded has about the same validity as the weak argument that tax dollars must be used to provide cell phones to the poor.  This is one more feel-good project that is being abused on a massive scale.  Should people have easy access to a phone, especially in the case of an emergency?  Of course.  That’s what pay phones are for.  They are cheap and they can be found almost everywhere (though their number has declined due to the proliferation of cell phones).  In addition, calls to 911 can be placed without cost.

I’m a constitutionalist.  I believe we need to return to the original understanding of our nation’s Founders regarding the prerogatives, powers, and expense of the federal government.  Those prerogatives, powers, and expenses should be limited.  I’m also a Christian and a theologian.  I do not advocate abandoning those who are truly poor and truly unable to help themselves.  But just because an idea sounds charitable and makes us feel more virtuous about ourselves doesn’t mean that we are obligated to put that idea into practice.

In the end, politicians speak about their care for the poor but in reality they’re buying votes with the political giveaways that are paid for on the backs of others.  It’s unjust.  It’s unfair.  It’s excessive.  And more than ever, it badly needs to be reformed.

Thanks to the Obama campaign and its emotion-driven, giveaway agenda, Big Bird has become the latest symbol of national decline.  The debate isn’t about whether we’ll care for the poor or not.  Our choice isn’t between rugged individualism or community concern.  It’s not between capitalism or working together, as Obama is trying to convince us.  Capitalism and free markets are one of humanity’s most perfect examples of what it means to work together.  I have economic needs.  You have economic goods to sell.  I have talents that are marketable and you have need of my skills.

See how it works?

The longer we wait for government the poorer we become.  The more government spends, the weaker our economy gets.  The costs of excessive government beneficence outweigh the benefits.

Big Bird, we love you.  We love you so much that we’re setting you free to find your own funding.  ABC, CBS, Fox, and all the others have made it work for them.  So please take your pretty yellow hand out of my pocket and get to work.

Haley Barbour: GOP Should Call to Abolish the US Department of Education

Picking up an article from Human Events, our Mississippi-focused friends over at Ya’ll Politics have reported that the former two-term GOP governor of the state is calling upon the Republicans to include in their platform a promise to abolish the Department of Education on the federal level.  This “certainly doesn’t mean you want to get rid of public education,” he said.

Kudos to Haley Barbour!  Public education existed before the department was organized on the level of the Cabinet by President Jimmy Carter in 1979, and it will continue to exist when the department is gone.

At the most basic level, the strongest argument for abolishing the US Department of Education is that it’s simply unconstitutional.  Whether you call it a good idea or a bad idea, whether you argue its spending to be wise or wasteful, and whether you can point to rising test scores or not, the fact is that the Constitution grants no powers to the federal government for the education of the citizens.  Some Republicans tried to remind us of this back in 1979 when the old Department of Health, Education, and Welfare was carved into two separate entities:  the Department of Education and the Department of Health and Human Services.  Liberal Democrats won the day.  They did it by abusing the Commerce Clause of the Constitution, the Pandora’s Box that liberal politicians use as a universal excuse for the federal seizing of unconstitutional powers.

As I have argued recently in this blog (HERE and HERE), Americans have a woeful lack of understanding when it comes to the United States Constitution–and more importantly, when it comes to the limited powers granted to the federal government it established.  If the Constitution is out of date, it’s only because it’s being ignored.  Its meaning and purpose are more important now than they have been since it was framed in Philadelphia at the Constitutional Convention of 1787.  Somehow, our brightest and best kids are leaving high school thinking that the purpose of elected federal officials and the bureaucrats they command is to come up with lots of romantic ideas about making our country a nicer place to live.  Nonesense!  The job of those officials is to govern federally within the confines of the limited powers granted them by the states.

Imagine what a mess it would be to play the game Monopoly by the standards of softball, or how ridiculous it would be to play chess by the rules of poker.  You can certainly do it by making all sorts of exceptions, by ignoring some rules and making up others to offset the impossibilities that arise.  But when you do that, would you really be playing Monopoly or softball anymore?  There would be nothing left of the games of chess and poker; there would only be the game pieces and a whole new system of gamesmanship that barely resembles what you started with.  This is where we find ourselves today with regard to the United States Constitution.  And too few of us really give a damn until a liberty we cherish is gone.

Public education has a long and useful history in the United States.  Even prior to the adoption of the Constitution, Congress (under the Articles of Confederation) set aside land to be used by local governments for the support of education by way of the Land Ordinance of 1785.  But the responsibility for education was understood to be a local one.  People in Massachusetts claimed no right to tell Virginians how to educate their children, nor did the good people of North Carolina presume to lecture New Yorkers on how they should educate and rear their children.

We do not need a federally-mandated common curriculum.   Let the people of Alaska, Maine, Virginia, Alabama, Mississippi and each of the other states decide what they will teach.  The competition between the states will be healthy and will push them to do better.  The United States are a federal cooperative.  The framers of the Constitution resisted calling the federal government a “national” government.  By constitutional standards, the federal government can only exercise a small number of duties as enumerated in the Constitition.  Education of all citizens isn’t one of them.

By reclaiming the right to educate their own children, the people of the states will once again have the opportunity to preserve their liberties.  They can demand of their educators that children be educated in the values and style of government established by the Constitution.  A new generation of young constitutionalists can arise to prune the federal government to its original purposes while weeding out the oversized, expensive bureaurocracy that burdens us all by limiting our lightbulb choices, dictating the water used in our toilets, taking us to war without a congressional declaration, scanning our genitals at airports, spying upon us with military drones, and limiting our constitutional right to free speech just because we are in the presence of an elected official.

The United States Constitution is a sacred compact between sovereign states, a powerful tool for mutual cooperation and defense.  It is not a contract for controlling the states.  It is said that those who control education control the people.  Let the people control and govern themselves by demanding and reclaiming the right to self-education, state by state.

Occupy-Style Rant Takes the Stage at Spring Hill College Commencement

As others have done for more than a century, the graduating class of Spring Hill College processed together beneath the ancient trees lining the Avenue of the Oaks this past Saturday.  Spring Hill, owned by the Society of Jesus (a Catholic order of professed religious men better known as “Jesuits”), is a venerable institution of higher learning founded by Bishop Michael Portier in 1830.  Among Jesuit colleges and universities (of which there are 27 in the US), Spring Hill is the third oldest.

The sturdy oaks under which we walked were planted by Roger Stewart, a Scotsman who came to the United States in the 19th century and who went into the cotton business.  He also built the Greek-Revival (c. 1850) style house at the end of the Avenue of the Oaks, before which the commencement stage is erected each year by hard-working college staff.  As a member of the faculty I am always impressed with our commencement exercises … and, of course, I’m always guaranteed a great seat for the festivities!

Though the morning was a bit muggy, the weather was nearly perfect for early May.  Faculty and graduates processed in academic regalia, recreating the great university traditions of medieval Europe, while parents and guests sat excitedly nearby.  The primary commencement speaker was the Hon. Sonja Bivins, a 1985 graduate of the college who now serves as a federal magistrate judge for the Southern District of Alabama.  Her address was a bit long, but its solid values and occasional lightheartedness held the attention of those in attendance.  As she wrapped up her comments with a plea that her audience always respect a summons for jury duty, I found myself thinking that hers might be among the very best graduation speeches I’ve ever heard.

Near the end of the ceremony came the annual speech known as the Senior Class Oration.  This curious tradition has been around for some time at Spring Hill, and the speaker is always chosen from the graduating class.  One can never be exactly sure about what will emerge as part of this presentation, but it usually offers a bit of levity framing a valuable moral lesson or a wise admonition about the future, or about the value of not forgetting lessons learned and friendships earned in the past.  In my humble opinion, this year’s senior oration was, well, in a word, a spectacle.  It was offered by Mr. Brock Philip Boone.

Recognizing that the date was May 5th, the speaker began with a round of awkward witicisms equating the celebration of Cinco de Mayo with the enjoyment of tequila and Corona beer.  Margarita guzzling and beer drinking, of course, are found only in the American version of this Mexican holiday.  Mexicans mark the date soberly as they recall the surprising victory of Mexican forces over their French overlords on May 5, 1862.   He then hurled a stereotypical insinuation at another of the Christian colleges in the Mobile area before steaming boldly into the main body of his commentary.  From this point what had been tasteless became offensive.

In a rant worthy of the Occupy Wall Street movement, he effectively drove a metaphorical dagger through the heart of goodwill that inspired the day.  He could have challenged us to rise above political differences to address the challenges of our time, but he chose to divide us instead.  Loaded with expressions of pop economics and inspired by only one wing of our nation’s rich political spectrum, the allocution railed against the unfairness of our capitalistic economic system in a manner that, in my opinion, would have thrilled the heart of Karl Marx himself.

If the ultimate goal of a college commencement is not just to celebrate a milestone, but to demonstrate that a new group of critical thinkers has been sent into the world, then this display was a miserable failure.  If our goal is to produce strong, independent minds capable of moral judgements while maintaing dialogue with those of other opinions, this speech demonstrated the exact opposite.  It contained very little–if anything–of critical value with regard to actually solving the problems that presumably inspired it.

The Association of Jesuit Colleges and Universities publishes an occasional magazine called Conversations.  A few months ago a professor at one of our Jesuit colleges published a small commentary there in which he challenged his fellow faculty to reflect upon the job we are doing as we teach our students to be people of justice.  I’m sorry that I didn’t keep that article, because his point has now come home to me through this distasteful experience.  He was quite sure that we college faculty are able to produce graduates who know how to protest and complain.  But will they use critical skills, reflective judgment, and wisdom to construct a world of justice?

That is a question worth asking.

To the great credit of Spring Hill, I have it on good authority that the speech as it was given was not the speech that was approved.  Nonetheless, if it is any indication of the depth of critical awareness being applied by college graduates to issues of economics, poverty, and justice, then it seems clear to me that we college professors have much more work to do.